806l'l2-NVPlVd 


SE  17 


THE  DISPROPORTION  OF  TAXATION 
IN  PITTSBURGH 


BY 

SHELBY  M.  HARRISON 

Director,  Department  of  Slirveya  and  Exhibits 

Russell  Sage  Foundation 

New  York  City 


Siinininry  of  findings  in  an  investigation  of  taxation  in 
i'ittsburgh,  as  a  part  of  the  Pittsburgh  Survey) 


Publication  No.  SiO 

R>ptiuted  from  Re  adjust  mk-VTo  i.v  T.vxatu-v 

\'ol.  LVIII  of  The  Ankals  of  tho 

:    r     ^         A<'Ai:,EMY   OF    POf.iriCAl.    AXD    SOCIAI.    .- 

Philid.-lphi;!,  .March,  1015 


^■^h 


Reprinted  from  The  Annals  of  the  American  Academy  of  Political  and 
Social  Science,  March,  1915 


THE   DISPROPORTION   OF   TAXATION   IN   PITTSBURGH 

By  Shelby  M.  Harrison, 

Director,  Department  of  Surveys  and  Exhibits,  Russell  Sage  Foundation, 

New  York  City. 

For  many  years,  Pittsburgh,  like  all  Gaul,  was  divided  into 
three  parts.  These  divisions,  which  continued  until  1912,  consti- 
tuted a  classification  of  real  estate  for  taxing  purposes,  into  ''agri- 
cultural" property  paying  one-half  the  tax  rate  prevailing  in  its  ward, 
''rural  or  suburban"  paying  two-thirds,  and  "full  city"  property 
paying  the  full  tax  rate.  The  classification  plan  dates  back  to  1867,' 
when  the  boundaries  of  Pittsburgh  were  being  enlarged,  taking  in 
parts  of  five  adjacent  townships — back  fifty  years,  when  electric  cars, 
telephones,  and  electric  lights  were  unknown  and  when  you  could 
count  on  your  fingers  the  American  cities  honey-combed  with  sewer 
burrows,  water  mains,  and  gas  pipes  distributing  municipal  services 
over  large  urban  areas.  On  the  theory  that  taxes  were  payments  for 
definite  benefits  bestowed  by  government  upon  particular  individuals, 
it  was  therefore  deemed  fair  to  discriminate  in  favor  of  farm  and  rural 
property  not  sharing  fully  in  city  lighting,  policing,  fire  protection 
and  sanitation.  In  other  words,  land  classification  was  a  measure 
designed  to  meet  a  specific  condition. 

The  condition  changed,  however,  with  the  growth  of  the  city, 
but  the  discriminations  remained  on  the  statute  books.  The  almost 
unavoidable  result  was  that  whole  districts,  similarly  located  and 
otherwise  much  alike,  were  placed  in  different  classes;  and  in  the  same 
way  individual  holdings,  often  in  the  same  ward,  were  inequitably 
taxed.  For  instance,  in  the  east  end  of  the  city,  property  for  some 
distance  along  one  side  of  Center  Avenue,  and  also  along  Fifth 
Avenue — two  main  thoroughfares — in  1910,  the  time  of  this  inves- 
tigation, was  classed  "full,"  paying  the  full  tax  rate,  while  at  the 
same  time  that  on  the  other  side  of  these  streets — very  similar  in 
character,  more  built  up,  if  anything — was  paying  but  two-thirds  of 
the  rate.     These  were  large  districts.     Anomalies  in  the  classifica- 

1  An  Act  of  1867  created  two  classes,  "rural,"  and  "full  city;"  in  1876  the 
third  class,  "agricultural"  was  added. 

321463 


2  The  Annals  of  the  American  Academy 

tion  of  small  individual  pieces  of  property  are  illustrated  in  a  block 
on  North  Highland  Avenue,  bounded,  on  the  other  sides,  by  Stanton 
Avenue,  Beatty,  and  Hay  Streets.  This  in  1910  showed  two  taxa- 
tion classes.  Property  fronting  on  North  Highland  and  Stanton 
Avenues  was  classed  as  rural,  while  just  across  Supreme  Alley, 
which  runs  through  the  block  and  parallel  to  North  Highland  Avenue 
and  Beatty  Street,  the  properties  fronting  on  Beatty  Street  were 
classed  as  full.  North  Highland  had  the  street  car  line  giving  it  a 
full  city  character,  but  the  Beatty  Street  properties,  while  they  had 
some  little  yard  space,  were  closely  built  up. 

But,  to  illustrate  injustices  that  were  more  inherent  in  the 
system  itself,  up  from  the  Allegheny  River,  near  Highland  Park, 
were  105  acres  of  good  high-lying  land  suitable  for  plotting  into  city 
lots,  which  had  been  held  out  of  the  market  by  one  family  since  be- 
fore the  Revolutionary  War.  The  estate  was  almost  entirely  sur- 
roimded  by  populous  neighborhoods;  on  the  east  was  the  growing 
East  Liberty  Section;  and  on  the  west  the  very  congested  tenement 
house  region  which  was  literally  dammed  up  against  the  fences  of 
the  farm.  The  land  was  put  through  only  the  motions  of  farming, 
hay  being  the  only  crop  that  amounted  to  anything,  and  yet  until 
1912  it  never  paid  more  than  the  "agricultural"  one-half  rate.  With- 
in 300  yards,  in  the  same  ward,  real  estate  closely  occupied  by  working 
people  was  taxed  at  full  rates.  Other  illustrative  instances  could 
be  related  at  length. 

Basing  the  ''rural"  class  on  picturesque  grounds  and  shrubbery, 
and  the  ''agricultural"  class  on  the  presence  of  woods  or  large  open 
tracts  used  in  reality  or  ostensibly  for  farm  purposes — definitions  laid 
down  by  the  law  and  the  court — ^the  Pittsburgh  assessors  returned 
the  real  estate  valuations  for  1910,  as  follows: 

Full  property $534,642,310 

Rural  property 208,224,892 

Agricultural  property 4,674,748 

Total $747,541,950 

Thus  in  1910,  real  estate  to  the  value  of  $212,900,000,  or  28  per 
cent  of  all,  was  classed  in  the  rural  and  agricultural  groups  and  escaped 
with  paying  only  two-thirds  or  less  (one-half  in  the  case  of  agricul- 
tural land)  of  the  current  rate  of  the  wards  where  located.  That  is, 
practically  10  per!  cent  ol  the  total  cash  values  brought  the  city 


Taxation  in  Pittsburgh  3 

no  tax  revenue  whatever.  Stated  another  way,  in  1910,  as  a  result 
of  the  classification  system,  over  one-fourth  of  the  real  estate  of  Pitts- 
burgh was  relieved  of  one-third  or  more  of  its  tax  rates.  The  propor- 
tions were  still  higher  in  previous  years. 

The  property  classed  as  full  comprised  in  the  main  all  business 
districts,  including  manufacturing  sites  and  railroad  properties,  and 
the  congested  residence  districts  where  the  mass  of  work  people  live. 


PmSBURGH 

csTATe  cLASsipicATKW  roR  rvKPoccs  or 
LOCAL  TAXAnO/l 
1910 

TRt  PITTSBVRGfl  5VKVEY 


souTH  sioe 


N/-*>«a^^ 


;^^P^/ 


OATA    rVK»IS«£D     BY     TMt 

COARP  OP  ASSesSORS 
riTTSBVHOH 


MAP  1.    GEOGRAPHICAL  LOCATION  OF  THE  THREE  CLASSES  OF  REAL  ESTATE 


Of  these,  it  was  the  latter,  and  the  small  storekeepers  who  served 
them,  that  suffered.  For  the  former,  the  situation  was  mitigated 
in  various  ways.  Sixty-six  feet  of  right  of  way,  as  well  as  a  consid- 
erable amount  of  other  real  estate  owned  by  railroads  operating  in 
the  city,  was  exempt  from  local  taxes  and  therefore  did  not  suffer 
from  the  full  classification.  Manufacturing  properties,  by  certain 
exemptions  and  tendencies  toward  leniency  in  making  valuations, 
got  off  with  a  much  reduced  full  rate.  Other  downtown  business 
property,  through  the  system  of  separate  sub-district  school  taxes. 


Tam  AxxAUB  or 


m  low  nfte  oon^med  with  anuJl 

fjglMMiliooda,    Hie  sietttesi  anomaly  of 

EanMsalf  kasi  able  were  sabjeet  to 

«o«be  BaxMMm city laies. 

had  lew,  if  aaj,  dweHiuftB  up(xi  it. 

of  land  and  the  under- 

€oand  in  many 

ifireci.    For  a  generation  Fitte- 

ataaaitkm  acfaeme  wfaidi,  because  of 

r  to  hold  great  areas  of  miimproYed  land, 

went  gmming  for  the  man  who  unproved 

ai  Ihb  whai  m  effect  was  a  double  tax  rate. 

of  "mral''  and  '^fdU  dty"  prop- 

the  tax  faj  wmfhiH  on  expensive  homes  surrounded 

fluweu — property  owned  by 

able  to  auppuri  the  govenunent — while 

bj  a  MMie  nbbon  of  graas,  or  none  at  all,  and 

block  after  block  on  both  street  and  alley, 

jndnded  features  other  than 

of  bmden.    Of  these  the 

sid>-district  sdiool  tax 

Ahhoi^^  ihe  daaeifi- 

of  the  aepaote  ward  rates,  the 

atfaii«bTltKlf. 

.    WUfe  Fittsbmgh's  cnrroit  ex- 

niie,  the  erection  and  maintenance 

by  separate  levies  m  the  03  tax  dis- 

te.    The  Kofth  Side  (formerly  AD^i^ieigr)  paid  a  tax 

in  other  parte 

for  meeting  spedal  ind^rted- 

in  tax  rates, 

tefistricted  in  1907  making  27  wafds 

fonBerfy  SB,*  the  old  tax  divisions  remained,  and 

as  fix  tax  rates.    Forexample, 

wwdf  property  on  the  sooth  side  of  the  narrow 


« la  IMi  tibm  ««fe  «  eld  waf^  oae  hsfiaf  beca  added  finer  ffMiistfiet' 

aiai  thBM  #r  fhcw  veie  dhiiei  lalo  two  iaslac  astnet*  Mcl^  tmOdaff  83 
ithtcstrbttrdcrs. 


*-«i^& 


iLmmm 
14«h.    A 


I     tifr 


6 


ThiJ  Annals  of  the  American  Academy 


Classification  and  Separate  Rates  Combined.  But  these  fac- 
tors, classification  of  land  and  ward  rates,  did  not  work  inde- 
pendently of  each  other.  What  then  was  their  result,  working 
together?  Did  the  inequalities  of  the  one  offset  the  inequal- 
ities of  the  other,  or  did  they  together  tend  to  double  up  incon- 
sistencies and  injustice?     To  determine  this,  upon  a  map  showing 


SEPARATE  TAX  PISTKICTS 

wrrn  katts  affliep 

1/^1910 
T/AE  rirTSDVRGR  5VKVEY 


MAP  2.    SEPARATE  TAX  DISTRICTS.  WITH  1910  TAX  RATES. 


the  nominal  tax  rates  in  each  of  the  63  different  tax  districts,  was 
superimposed  the  map  showing  land  classification.  In  other  words, 
using  the  various  separate  tax  rates  as  bases,  we  went  over  the  city 
and  shaved  off  one-half  the  ward  rate  wherever  we  found  land  classed 
as  agricultural,  and  shaved  off  one-third  the  rate  where  it  was  classed 
rural.     This  left  full  rates  only  where  the  land  was  classed  as  full. 


Taxation  in  Pittsburgh  7 

The  result  of  this  combination  is  that  actual  rates  on  assessed  valua- 
tions varied  in  the  different  localities  from  7.85  to  25  mills  on  the 
dollar.  In  our  full  report  (see  Volume  Five,  the  Pittsburgh 
Survey),  these  inequalities  were  brought  out  en  masse  by  dividing 
the  detailed  table  of  localities  and  rates  into  three  large  groups, 
placing  all  realty  paying  under  12  mills  in  the  first,  all  paying  above 
12  and  under  16  in  the  second,  and  in  the  third  all  property  paying 
16  mills  and  over.  It  was  found  that  the  low  rates  were  being  paid 
almost  entirely  by  large  "agricultural"  holdings  and  expensive  resi- 
dence property,  while  the  high  rates  were  saddled  upon  small  busi- 
ness realty,  small  residences,  and  congested  tenement  neighborhoods. 
The  middle  group  included  principally  the  downtown  business  wards, 
several  manufacturing  wards  and  a  number  of  well-to-do  residence 
districts.  The  conclusion  from  this  grouping  was  inevitable.  The 
inequalities  of  the  land  classification  and  of  the  separate  ward  rates 
did  not  offset  each  other.  Rather  they  tended  to  accentuate  the 
disproportions. 

It  may  be  objected  that  such  conclusions  as  to  the  injustice  of 
the  tax  burdens  cannot  be  drawn  until  the  tax  is  followed  a  step 
further;  that  the  ultimate  payers  of  the  tax,  not  alone  the  property 
taxed,  must  be  located.  The  answer  is  found  in  two  theories  of  the 
incidence  of  taxation. 

The  first  is  the  one  held  by  the  average  business  man,  and  is  that 
the  whole  tax,  both  on  land  and  on  buildings,  is  shifted  to  the  shoulder 
of  the  tenant.  The  second,  that  held  by  the  economists,  is  that  in 
the  main,  when  both  house  and  ground  are  occupied  by  the  owner,  the 
real  estate  tax  cannot  be  shifted,  but  is  borne  by  the  owner.  When 
the  owner  rents  the  property  to  another,  the  owner  still  bears  the 
tax  on  the  land.  The  tax  on  the  house,  however,  is  shifted  to  occu- 
pier or  tenant.  When,  however,  tax  rates  throughout  a  city  are  very 
unequal,  as  is  the  case  in  Pittsburgh,  and  when  the  people  tend  to 
congregate  in  certain  quarters  of  the  city  and  seem  unwilling  to  move 
out  to  the  suburbs,  as  is  usually  the  case  with  immigrants,  a  part  at 
least  of  the  taxes  on  land  that  is  rented,  and  all  the  tax  on  the  build- 
ings, tend  to  be  shifted  upon  the  tenants.  So  on  the  theory  of  the 
business  man  and  of  the  economist,  the  conclusion  that  the  bulk  of 
the  local  real  estate  taxes  fell  upon  the  renting  population,  the  small 
home  owners,  the  working  people,  and  the  small  storekeepers  they 
deal  with,  is  not  changed. 


8 


The  Annals  of  the  American  Academy 


Any  Mitigating  Elements  in  the  System.  A  question  next  taken 
up  was  whether  there  were  any  other  elements  in  the  system  of 
laying  the  municipal  tax  burden  which  tended  to  minimize  these 


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results  or  to  aggravate  them.  Four  points  deserved  special  atten- 
tion: under-valuations ;  assessment  revisions;  triennial  assessments; 
and  exemptions. 


Taxation  in  Pittsburgh  9 

As  to  the  first,  it  is  proverbial  that  the  small  man  carries  the 
heavy  end  of  assessed  valuations;  and  the  lack  of  publicity  in  Pitts- 
burgh had  no  other  effect  than  to  aggravate  this  condition.  A  num- 
ber of  Pittsburgh  property  owners  familiar  with  local  taxation  testi- 
fied to  the  local  working  of  this  tendency  to  undervalue,  relatively, 
large  holdings.  In  support  of  the  accuracy  of  the  Pittsburgh  assess- 
ments, however,  it  should  be  noted  that  the  assessors  appraise  build- 
ings and  grounds  separately,  a  procedure  which  is  more  likely  to  get 
at  correct  market  values  than  by  lumping  them  together.  On  the 
other  hand,  the  difficulty  of  estimating  values  in  a  city  subject  to 
such  revolutionary  growth  as  Pittsburgh  was  illustrated  when  we 
chose  a  number  of  districts  typifying  expensive  residence  property, 
small  homes,  tenements,  small  business  property,  downtown  busi- 
ness property,  and  so  forth,  and  had  them  appraised  by  several 
leading  real  estate  men  of  the  city.  These  figures  varied  as  much 
from  each  other  as  they  did  from  those  of  the  assessors.  Moreover, 
the  transfer  books  in  the  assessors'  office  showed  that  out  of  56  trans- 
fers in  the  new  first  ward  in  1910,  34,  or  60  per  cent,  were  for  consid- 
erations of  $1  or  other  nominal  amounts;  25  out  of  41  in  the  second 
ward,  26  out  of  66  in  the  third  ward,  and  so  on.  It  was  impossible, 
therefore,  to  any  large  extent,  to  compare  sale  prices  with  assess- 
ments, or  determine  the  percentage  of  valuation  assessed  against 
various  kinds  of  property.  With  such  disparity  in  estimated  values 
and  with  the  actual  considerations  concealed  in  so  large  a  proportion 
of  sales,  the  extent  to  which  under-valuations  were  likely  to  favor 
the  big  property  owners  rather  than  the  small  owners  depended  very 
largely  upon  the  personnel  of  the  assessing  staff,  and  the  pubHcity 
given  their  work.  In  regard  to  pubhcity,  very  little  was  done  beyond 
keeping  the  assessors'  books  open  to  pubUc  inspection. 

Second,  while  the  privilege  of  appeal  for  revision  of  assessments 
is  open  to  all,  it  was  the  large  property  owner  chiefly  who  benefited 
by  it.  The  board  of  assessors  in  Pittsburgh  is  also  the  board  of 
tax  revision.  At  certain  times  each  year  the  revision  board  gives 
notice  that  it  will  hear  appeals  for  changing  appraisals;  and  the  num- 
ber of  responses  to  the  notice  is  large.  By  leafing  through  the 
assessors'  books,  in  which  the  revisions  are  recorded  in  red  ink,  we 
could  see  that  a  goodly  number  of  appeals  had  succeeded,  the  revision 
being  downward,  of  course:  and  that  in  the  great  majority  of  cases 
the  properties  affected  were  those  held  by  the  well-to-do  and  rich— 


10  The  Annals  of  the  American  Academy 

large  and  valuable  holdings.  This  impression  was  corroborated  by 
the  statements  of  several  members  of  the  board.  The  explanation 
is  not  necessarily  that  such  taxpayers  have  greater  influence.  Few, 
if  any,  of  the  small  property  owners  ever  appear  before  the  board  to 
ask  for  revision,  but  it  pays  the  big  owners  to  appeal;  real  estate  men, 
agents  and  attorneys  for  owners  scrutinize  the  assessments  closely, 
watch  the  papers  for  notices  of  hearings,  present  their  cases  in  the 
best  form,  and  meet  with  some  success  in  their  appeals,  almost  as  a 
matter  of  business. 

As  to  the  third  point,  triennial  assessments,  under  the  plan  in 
vogue  for  years  in  Pittsburgh,  tax  rates  tend  to  rise  in  the  second  and 
third  year  after  assessments.  Where,  as  was  the  case  in  Pittsburgh, 
tax  burdens  are  unequally  carried,  such  increases  in  the  tax  rate,  of 
course,  add  new  burdens  to  be  borne  in  the  same  old  unequal  ratios. 
Until  1909,  assessments  oftener  than  every  three  years  were  illegal. 
The  new  act,  however,  provided  for  new  assessments  in  any  ward 
where  they  should  be  deemed  necessary  in  any  subsequent  year. 
Thus  the  assessors  were  armed  with  full  power  to  make  annual 
valuations  throughout  the  city  as  is  done  in  New  York,  Philadelphia, 
Boston,  St.  Louis,  and  many  other  large  cities.  The  department 
did  not  make  a  new  assessment  for  1911,  however,  nor  for  1912,  in  a 
thoroughgoing  way  as  was  done  for  the  triennial  year  1910. 

Fourth,  Pittsburgh's  exemptions  of  real  estate  from  local  taxa- 
tion may  be  divided  into  two  groups,  commercial  property  and  non- 
commercial. Non-commercial  property  included  the  long  list  gener- 
ally exempted  in  all  cities,  such  as  churches,  synagogues,  Christian 
and  benevolent  associations,  schools,  colleges,  libraries,  hospitals, 
asylums,  cemeteries;  also  city  property,  such  as  fire  department 
buildings,  city  halls,  parks,  bath  houses,  poHce  stations,  and  mar- 
kets; and  county,  state  and  federal  property,  including  court  houses, 
jails,  penitentiaries,  armories,  and  post  offices.^  In  addition,  of 
course,  all  public  streets  and  alleys  are  not  subject  to  tax  levies. 
The  city  markets  and  the  post  offices  are  grouped  here  although  they 
are  commercial  in  character.  They  are  owned  by  the  government, 
however,  and  their  profits  do  not  go  to  individuals. 

A  more  or  less  unique  feature  of  local  exemptions  is  found  in  the 
commercial  group.     In  1910,  Pittsburgh  exempted  $22,774,857  of 

3  The  total  valuation  of  these  exemptions  had  never  before  1910  been 
computed  by  the  assessors. 


Taxation  in  Pittsburgh 


11 


real  estate  owned  by  railroad  companies,  street  car  companies,  gas 
companies,  telephone,  incline  plane,  water,  light  and  heating  com- 
panies. This  amount  is  split  up  among  the  different  kinds  of  com- 
panies, as  follows: 

Exempt  Commercial  Property  in  Pittsburgh  in  1907 


Kind  of  Property 

Land 

Buildings 

Total 

Railroad 

Incline  nlanes 

$17,106,701 

56,973 

449,918 

988,205 

11,425 

58,110 

$1,805,150 

345,700 
1,952,675 

$18,911,851 

56,973 

795,618 

2,940,880 

11,425 

58,110 

Telephone  and  telegraph 

Light,  gas,  heating,  etc 

Water  companies 

Total 

$18,671,332 

$4,103,525 

$22,774,857 

These  amounts  are  taken  from  the  assessors'  book  of  exemptions 
for  1907,  as  the  1910  book  had  not  at  the  time  of  this  inquiry  been 
written  up."*  New  exemptions  had  been  added  on  the  records  and 
property  recently  taken  out  of  the  exempt  Ust  substracted;  but  a 
careful  appraisal  of  exempt  properties  was  evidently  not  regarded  as 
of  importance,  some  of  the  valuations  going  far  back  of  1907.  The 
figures,  therefore,  are  considerably  under  present  values. 

Sixty-six  feet  of  right-of-way  of  all  railroads  operating  within 
the  city  limits  is  not  subject  to  local  rates.  The  total  of  railroad 
land  exempted  amounts  to  $17,106,701,  or  76  per  cent  of  the  total 
commercial  exemptions.  Practically  all  is  right-of-way.  The  other 
25  per  cent  of  total  commercial  exemptions  is  mainly  buildings  and 
equipment  of  railroads  and  building  sites  and  buildings  of  the  other 
companies  indicated.  Of  these,  railroad  property,  other  than  land, 
in  turn  represents  almost  one-third. 

The  Pennsylvania  Railroad  owns  the  largest  amount  of  this 
exempt  property — 64  per  cent  of  the  grand  total.  Thirteen  miUion 
dollars  in  land  and  over  one  and  a  half  million  dollars'  worth  of 
buildings,  sheds  and  so  forth,  belonging  to  it  pay  no  local  taxes.  The 
buildings  are  situated  almost  entirely  on  the  North  Side  and  include 
the  Fort  Wayne  depot  valued  at  $145,000,  a  number  of  freight  build- 
ings, machine  shops,  storage  houses,  offices,  and  over  $900,000  in  tracks. 

*  Exemptions  were  listed,  however,  in  1913. 


12  The  Annals  of  the  American  Academy 

In  the  group  furnishing  municipal  service,  the  Philadelphia 
Company,  which  with  its  subsidiary  companies  supplies  traction, 
gas,  and  electricity,  is  favored  most,  enjoying  an  exemption  of  over 
two  and  a  quarter  million  dollars.  The  eight-story  office  building  on 
Sixth  Avenue,  and  the  ground  on  which  it  stands,  which  were  valued 
in  1910  at  $527,950,  paid  a  tax  upon  only  half  this  value,  $263,975 
being  exempt.  The  large  power  house  and  22.5  acres  of  land  in  the 
old  9th  ward  North  Side,  worth  $458,000;  the  11  or  more  acres  of 
land  with  refining,  purifying,  retort  and  engine  houses,  and  office 
buildings,  in  the  old  14th  ward,  worth  $888,600;  and  other  property 
in  the  old  15th,  20th,  and  21st  wards,  most  of  this  being  ConsoHdated 
Gas  Company  property,  are  totally  exempt  from  city  taxation. 
Exemptions  for  property  of  Allegheny  County  Light  Company, 
Allegheny  Heating  Company,  and  Pittsburgh  and  Castle  Shannon 
Railroad  constituent  companies  are  also  of  considerable  size. 

Telephone  companies  are  favored  also,  thirteeen-sixteenths  of 
the  Central  District  and  Printing  Telephone  Company's  three-story 
telephone  exchange  property  on  Fourth  Avenue,  valued  at  $193,200, 
being  exempt;  and  all  of  its  eight-story  brick  office  property  on  Sev- 
enth Avenue  and  Montour  Way,  valued  at  $313,200,  besides  smaller 
holdings  throughout  the  city.  The  Pittsburgh  and  Allegheny  Tele- 
phone Company  pays  no  local  taxes  on  $114,525  of  property,  mainly 
office  buildings.  Incline  plane  companies,  water  and  miscellaneous 
companies  own  exempted  property  to  the  amount  of  $126,508. 

Why  these  exemptions?  The  answer  takes  us  back  first  to  the 
general  fiscal  policy  of  Pennsylvania.  The  state  has  practically 
withdrawn  from  the  field  of  general  property  taxation,  and  draws  a 
considerable  part  of  its  revenue  from  the  operations  of  public  service 
corporations.  Local  taxing  bodies,  in  turn,  do  not  tax  the  business 
of  the  railroads  which  run  through  them,  nor  to  any  large  extent  that 
of  local  service  corporations.  This  has  been  a  matter  of  legislation. 
When  we  go  deeper  and  ask  why  real  estate  and  buildings  owned  by 
such  corporations  are  lifted,  along  with  their  franchises,  out  of  reach 
of  the  municipal  tax  department,  we  come  into  a  realm  not  of  legis- 
lation but  of  judge-made  law. 

Briefly,  the  rule  was  first  laid  down  by  the  courts  that  real  and 
personal  property  necessary  for  the  exercise  of  franchises  of  quasi- 
public  service  corporations  loses  its  character  as  buildings,  lands,  and 


Taxation  in  Pittsburgh  13 

so  forth,  and  is  exempt  from  local  taxation.  By  a  special  act  of 
Assembly  in  the  '50's,  however,  all  Pittsburgh  railroad  property  was 
made  subject  to  city  taxation.  But  when  half  a  century  later  Pitts- 
burgh attempted  to  assess  not  only  buildings  but  right-of-way  under 
this  act,  the  supreme  court  decided  that  it  did  not  apply  to  right-of- 
way.  Further,  the  act  of  1859  did  not  include  Allegheny  (North 
Side),  and  when  the  two  cities  were  consolidated  the  supreme  court, 
reversing  a  lower  court,  held  that  the  Allegheny  freight  yards, 
stations,  and  so  forth,  could  not  be  taxed  by  the  greater  city  for  the 
purpose  of  liquidating  its  floating  and  bonded  indebtedness  at  the 
time  of  annexation.  Nor  has  this  North  Side  railroad  property  paid 
taxes  to  meet  the  current  expenses  of  the  greater  city  up  to  1914. 
Thus  it  is  that  at  the  time  of  consolidation  all  of  the  quasi-public 
service  corporation  property  on  the  North  Side  continued  exempt; 
and  in  the  old  city,  railroad  right-of-way  was  exempt  and  so  con- 
tinues. Street  railways  and  incline  planes  are  classed  with  railroads 
and  are  entirely  exempt  on  the  North  Side,^  and  in  the  old  city  the 
road  bed  is  not  taxed.  Light,  gas,  heating,  water,  and  telephone 
companies  come  under  the  general  rule  exempting  property  necessary 
for  the  exercise  of  their  franchise. 

It  may  be  contended  that  the  exemption  from  local  taxes  of 
stations,  warehouses,  power  plants,  and  other  improvements  is  justi- 
fied in  that  it  is  an  encouragement  to  the  extension  of  transportation 
facilities.  This  contention  would  seem  justified  only  in  a  city  and 
state  where  the  public  control  of  pubhc  service  corporations  is  such 
that  citizens  would  receive  better  service  for  the  same  cost  or  the 
same  service  at  less  cost  because  of  the  exemption.  Such  a  principle 
would  lead  far  afield,  moreover.  The  large  distributors  of  milk,  for 
example — a  necessity  fully  as  important  as  gas  or  transportation — 
might  well  argue  that  they  should  be  let  off  from  paying  taxes  on  the 
buildings  which  house  their  refrigerating  and  bottling  plants.  But 
whatever  the  attitude  toward  not  taxing  buildings,  the  scot-freedom 
from  land  taxes  of  these  commercial  corporations  does  not  seem 
justifiable.  Land  values  are  very  largely,  if  not  entirely,  created  by 
the  community.  If  there  is  any  agreement  at  all  among  taxation 
authorities,  it  is  that  real  estate  should  bear  an  important  part  of 

'The  Pittsburgh  Railways  Company  pays  a  relatively  small  gross 
receipts  tax  and  tax  on  cars  on  the  North  Side.  In  1909  the  former  was 
$38,416.99;  the  latter,  $1,871.24. 


14  The  Annals  of  the  American  Academy 

local  taxes;  and  yet  Pittsburgh  makes  an  exception  in  the  case  of 
over  $18,000,000  in  land  values  and  absolves  them  from  carrying 
their  part  of  the  city's  expenses.  The  amount  is  as  great  as  if  the 
city  exempted  all  real  estate  in  the  old  38th,  39th,  and  40th  wards, 
four  times  over. 

Summary.  To  sum  up,  then,  it  was  found  that  the  dual  system 
of  discriminations  by  land  classes  on  the  one  ha,nd  and  ward  rates  on 
the  other,  in  vogue  in  Pittsburgh  up  to  1912,^  saddled  the  heaviest 
burden  of  local  taxation  upon  the  man  of  small  means,  the  small 
householder,  the  small  renter,  and  the  small  business  man.  It  was 
found  also  that  other  important  features  of  the  taxation  system,  having 
to  do  with  revision,  under-valuations,  and  triennial  assessments,  aggra- 
vated rather  than  mitigated  these  inequalities,  while  the  exemption 
of  considerable  commercial  property  made  it  necessary  to  impose  a 
higher  rate  upon  all  taxpayers.  The  report  therefore  concludes  with 
the  recommendation  of  four  functional  reforms : 

First :  The  schedule  of  tax  rates,  untangled  to  a  great  extent  by 
the  abolition  of  the  district  school  taxes,  should  be  further  simplified 
and  should  be  kept  simple.  There  are  often  local  responsibilities 
which  are  so  peculiar  to  the  annexed  territory  that  they  should  be 
shouldered  for  a  short  time  at  least  by  the  individuals  or  community 
in  which  they  originated,  but  the  period  of  readjustment  should  be 
made  as  brief  as  possible. 

Second:  The  machinery  for  an  annual,  instead  of  a  triennial, 
assessment  of  all  city  real  estate  should  be  set  to  work.  Taxes  are 
levied  annually  and  city  budgets  are  planned  annually;  the  basis  for 
the  raising  of  these  taxes  should  also  be  made  up  annually. 

Third:  Greater  publicity  of  assessments  through  the  printing 
and  wide  distribution  of  the  assessment  lists,  the  issuing  of  reports 
with  maps  and  diagrams  showing  assessment  methods,  the  charting 
of  assessed  valuations  out  from  the  central  point  of  highest  value,  all 
are  methods  which  have  helped  solve  the  difficulty  of  maintaining  a 
uniform  ratio  between  assessed  valuations  and  cash  values,  in  other 
places. 

Fourth:    Real    estate    owned    by    public    service    corporations 

«  The  Halferty  bill  enacted  in  1911  abolished  the  tax  classification  of  real 
estate ;  in  the  same  year  a  new  school  code  was  adopted  which  did  away  with 
the  separate  sub-district  school  tax  levies. 


Taxation  in  PittsbiJhgh   '    *  *    '  '    ""'     '15' 

should  be  subject  to  uniform  local  taxation.  The  city's  poHcy  is 
inconsistent  regarding  this  property.  In  one  part  of  the  city  it  is 
taxed,  while  in  another  it  is  exempt.  The  least  that  should  be  de- 
manded is  uniformity  throughout  the  city.  But  more  should  be 
demanded;  more  than  $18,000,000  worth  of  land  owned  by  these 
corporations  should  be  taxed. 

These  four  changes  would  round  out  the  radical  reform  wrought 
by  abolishing  land  classes  and  ward  rates.  They  would  tend  to 
clear  away  further  discriminations  and  disproportions  due  to  geo- 
graphical location,  to  changes  in  values  from  one  year  to  the  next, 
to  the  human  equation  in  assessing  real  estate,  and  to  the  favoritism 
heretofore  shown  to  one  corporate  group  of  taxpayers. 


THE  AMERICAN  ACADEMY  OF  POLITICAl 
AND  SOCIAL  SCIENCE 

Origin  and  Purpose.  The  Academy  was  organized  December  l-i 
1889,  to  provide  a  national  forum  for  the  discussion  of  political  anj 
social  questions.  The  Academy  does  not  take  sides  upon  controverte 
questions,  but  seeks  to  secure  and  present  reliable  information  t| 
assist  the  public  in  forming  an  intelligent  and  accurate  opinion. 

Publications.  The  Academy  publishes  annually  six  issues  of  it| 
^'Annals*'  dealing  with  the  six  most  prominent  current  social  and  politi 
cal  problems.  Each  publication  contains  from  twenty  to  twenty-fivj 
papers  upon  the  same  general  subject.  The  larger  number  of  th| 
papers  published  are  solicited  by  the  Academy ;  they  are  serious  dif 
cussions,  not  doctrinaire  expressions  of  opinion.  The  Academy  pub! 
cationSf  now  approaching  one  hundred  and  fifty  in  number,  give 
most  comprehensive  account  anywhere  obtainable  of  the  political 
social  questions  that  have  been  before  the  American  people  dui 
the  past  quarter  century. 

Meetings.     The  Academy  holds  five  scientific  sessions  each  yei 
during  the  winter  months,  and  it  also  has  an  annual  meeting  in  Api 
extending  over  two  full  days  and  including  six  sessions.     The  paper] 
of  permanent  value  presented  at  the  meetings  are  included  in  th| 
Academy  publications. 

Membership.     Membership  in  the  Academy  may  be  secured 
applying  to  the  Secretary,  36th  Street  and  Woodland  Avenue,  PI 
delphia.     The  membership  fee  is  $5.00;  life  membership  fee,  $10( 
Members  receive  all  the  regular  publications  of  the  Academy,  arj 
hivited  to  attend  and  take  part  in  the  scientific  meetings,  and  hav| 
the  privilege  of  applying  to  the  Publication  Board  for  information  up< 
current  political  and  social  questions. 


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